The special abilities such as critical thinking skills and


rational choice perspective is also known as utilitarianism, in which
self-interested individuals will act on their own preferences with the aim to
maximize utility. By adopting an objective approach, it uses mathematical models
to predict behaviour. It suggests that individuals will start a business either
due to greater preference for entrepreneurship, or because the expected utility
of choosing entrepreneurship rates highest amongst all other occupational
choices, given the relative level of incentives such as the provision of pecuniary
and non-pecuniary benefits (Morton and Podolny 2002). Essentially, it can be argued
that individuals will need to have special abilities such as critical thinking
skills and analytical skills not only to be able to undertake complicated econometric
analysis for the correct calculation of expected utility, but also to empower individuals to have the cognitive power in
order to make rational choices. Cognitive
biases on perceived ability may
arise from optimism and are affected by social norms, which will directly
affect individuals’ rational decision on
occupational choices (Fraser and Greene 2006). Given that
individuals’ behaviour is affected by outcome as well as the expectation of
outcome, special abilities are required to minimise systematic bias to ensure that individuals are not reliant on
a set of heuristic principles in
decision-making (Kahneman et al 1982).

Another way of looking at the topic is to consider whether entrepreneurs
learn over time. If they do, then no special abilities are required in the
first place, since it can be developed with time. Frankish et al. (2008)
monitored the performance of 6,000 new business customers at Barclays. Assuming
more information will be gained as experience accumulates, individuals will
have better ability in decision-making progressively over time. However, no
differences in performance were found as time past, implying that experience
does not affect performance and entrepreneurs do not learn over time.
Therefore, special abilities are necessary in the first place for successful entrepreneurship.
Moreover, North et al. (1991) propose that only firms that are flexible and
adaptive will survive in the long run. This means special ability such as
effective leadership and managerial capability are required in order to allow
effective changes and necessary adjustments be conducted throughout layers of
management in a timely manner.

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However, Jovanovic (1982)’s noisy selection offers an opposing view,
where good firms are seen to be able to survive while bad firms will fail over
time. In fact, the utility function rather than one’s ability dictates the
decision-making process. Assuming entrepreneurial ability is stable and
unchanging, no special ability is required as it is a passive learning process
where individuals will find out if entrepreneurship is suitable for them sooner
or later. In line with this, Levinthal (1997) suggests that entrepreneurs will
adapt to the uncertain market environment via a trial and error process, in
which many of the best moves are triggered by ‘accidents’ rather than the use
of special abilities. Likewise, the performance threshold, rather than
performance itself, determines the survival of firms (Gimeno et al. 1997).
Therefore, poor performing firms are able to survive as they are staying in a
lower performance threshold, and special ability is not a prerequisite requirement
for the survival of a business.  

However, other factors such as the role of family and capital will also
affect the original decision to enter entrepreneurship (Blanchflower and
Oswald1998). In particular, capital constraint is seen as a determent to entrepreneurship, even if one possesses the
necessary skills and talents (Evans and Jovanovic 1989). Despite higher entrepreneurial
ability will lead to higher marginal products of capital at any level of capital,
where special ability makes it easier for running
a business, situational factors such as liquidity position should also
be considered in the utility model.


The Psychological perspective  


    Similar to the rational choice approach, the
psychological approach adopts a scientific methodology to evaluates subjective
matters in an objective way. It suggests that entrepreneurial behaviour is
explained by individual’s intrinsic nature, such as one’s innate ability and subjective
perceptions (Naffziger el al. 1994). Specifically, behaviour is affected by
one’s judgment on his perceived entrepreneurial ability, rather than what the
reality is (Krueger 1995). Unlike the rational choice approach, who looks at
individual’s choice in one given situation, the psychological perspective
focuses on personal intentions in any situations. In addition, the trait theory
is widely used to show the relationship between entrepreneurial
characteristics and business’ performance.

    To illustrate, twenty-six popular traits
have been identified by Chell et al. (1991) and particularly, the big three
characteristics, namely ‘the need for achievement’, ‘locus of control’ and
‘risk-taking propensity’ are seen as the fundamental driving characteristics to
business success. Entrepreneurs tend to have a high need for achievement and a compulsive
desire to strive for excellence. It is seen as necessary for entrepreneurship,
despite no innate ability is required since it can be developed during both
childhood and adulthood. Entrepreneurs also have a higher propensity and acceptance
to risk (Brockhaus 1980). Accompanied with a proactive attitude, all of these characteristics increase their likelihood of discovering and exploiting opportunities (Khilstrom
and Laffont 1979). Indeed, ‘alertness to
opportunity’ is a crucial differentiating factor to business success since opportunities
always arise from market inefficiencies but they are captured only by the ‘alerted’
ones (Kirzner 1997). Undoubtedly, this is also affected by the access to information,
and different learning styles will affect the mind-set of entrepreneurs and
their ability to learn over time. Nevertheless, a positive correlation between entrepreneurial
personality and business performance is established, suggesting complex psychological attributes are required for entrepreneurship.

    However, entrepreneurship is
a dynamic concept while trait theory is a static concept. This suggests that trait
theory itself might not be a good predictor of individual success. In light of this,
the cognitive model with notion of attitude is introduced as an alternative
approach to address entrepreneurial behaviour.

    The locus of control could be a possible
explanation. People with strong internal locus of control believe that they can
control the outcome while people with strong external locus of control believe
that outcome will be dictated by luck and other random factors. Taken together,
the former tends to be an entrepreneur who undertake self-motivated behaviour (Rotter, 1966), while
the later will avoid entrepreneurial activity. Similarly, entrepreneurial intention and subsequently business
performance will be affected by entrepreneurial self-efficacy (ESE). Individuals
with high ESE are confident about their own ability, they make greater commitment
to entrepreneurial activities and are more likely to deliver excellent
performances. Conversely, people with low ESE such as women and ethics
minorities may be equipped with entrepreneurial abilities but entrepreneurial
activity is avoided due to a low ESE affected by social norms and structures (Chen
et al 1998). As such, the perception of special ability rather than special ability
itself determines the choice to entrepreneurship.

    Although this may be true, situationists
believe that one’s behaviour is more dependent upon the situation rather than individual
characteristics (Mischel 1968). Specifically, entrepreneurial characteristics
are restricted within the business’ environment, which will consequently affect
one’s personality (Carsrud and Brannback 2015). Also, the greater the experience the
individual had, the greater the ability to identify opportunities (Cardozo and
Ray 2003). Considering this, the opposing view argues that entrepreneurial
alertness is determined by the access of knowledge, rather than special


The Biography Perspective


The biography approach is an individualistic and purposive approach where
entrepreneurship is considered as an emotional journey in which different participants
will attach different meanings to their behaviours. While both the rational choice
approach and the biography approach focus on individual preferences, the former
adopts an objective statistical methodology, the latter adopts a subjective
qualitative approach to view individual intentions that determine the development of entrepreneurial attitudes. This
is one of the biggest criticisms as different interpretations between researchers
will result in great variances, making it difficult to reach an intuitive
conclusion. However, this is also one of the biggest strengths of the approach
since it considers the market uncertainty as well as differences in social structures, allowing
researchers to portrait a fuller picture of entrepreneurial behaviour via narrative
means of ‘storytelling’ that would otherwise remain uncovered if conventional
approaches were adopted.  

Bhide (2000) evaluated a hundred
of the fastest growing start-ups in the US. Common qualities such as high level
of resilience, tolerance for ambiguity and adaptability to new circumstances
are identified amongst successful entrepreneurs. It is seen that their unique
abilities distinguish them from unsuccessful entrepreneurs, allow them to resolve
problems such as those arise from failure to secure resources. Bhide’s finding
presents an affirmative argument in which only by having the ‘right stuff in
place, rather than luck, will allow one to transform a start-up into a
long-lived organisation.

    However, Hashemi and Hashemi (2002) argue
that everyone can learn, gather knowledge and improve during the course of the
business. Without a revolutionary idea, what guided them through the ups and
downs and eventually achieve success in business are the strong dedication,
faith and extreme passion, rather than special abilities. These attitudes allow
one to pay extra attention and constantly upgrade himself, despite learning
from experience also depends on the quality of relationships with outsiders (Gibb


Personal opinion


To avoid over-simplification, all three perspectives can be
integrated in order to bring
in different but complementary viewpoints. In practice, the complexity of
contemporary workplaces might suggest that rationality in decision-making might
not be possible. Considering both sides of the arguments in each perspective, I
believe having special abilities make it easier to achieve entrepreneurial
success. However, it is not only a question of who can do it, but also the
question of who has enough motivation to do it. In line with the Coffee Republic case and
the psychological perspective, I believe individual’s expectation of personal pursuit
strongly affects entrepreneurial behaviour. Only those with sufficient
motivation and passion will be able to be persistent in overcoming any ongoing
challenges at the same time as improving one’s abilities. For example, Casson (1982) argues
that the ability to form informed ‘judgment’ distinguishes successful
entrepreneurs from the rest, and such ability reflects an innate ability but
more frequently it is deriving from learning from experience. Despite traits
not unchanging over time (Hampson 1988), the question of whether the individual
can actually learn and improve from experiences is another highly contested

Moreover, the development of entrepreneurial spirit is affected by many
other factors such as financial support and education (Burke et al 2002). For
this reason, entrepreneurship reflects the complex interactions between
individuals and the context, as seen in the women’s movements and reform of
minorities’ civil rights that have caused a dramatic increase in the number of
entrepreneurs during the 1980s. In other words, favourable social conditions
have encouraged the initial move to enter entrepreneurship, and business
success might not be the result of ‘having the right stuff’ but rather ‘being
in the right place at the right time’. Also, industry and geographical differences means that not every entrepreneur
needs the same set of skills.

    In this
essay, the rational choice approach is useful in understanding the rationale
behind individuals’ initial choice of entrepreneurship. Using trait theory and
cognitive models, we can examine the chance of business survival and success together
with the qualitative side under the biography perspective. It is concluded that
special ability is
required to some extent for entrepreneurship, and we should also consider
issues such as whether abilities can be developed over time, the level of motivation,
and other
social factors in order to draw a more comprehensive conclusion.